Back to top

Analyst Blog

Impressive third-quarter fiscal 2013 results and strong outlook facilitated the shares of Constellation Brands Inc. (STZ - Analyst Report) to reach a new 52-week high of $38.99 yesterday, before closing at $38.55. This Zacks Rank #2 (Buy) company has amassed a solid return of approximately 86.0% since Jan 3, 2012. Average volume of shares traded over the last 3 months stands at approximately 1,836,460.

Drivers that Triggered Momentum

An impressive record of beating the quarterly earnings expectations, an upbeat fiscal 2013 outlook, a sustained focus on brand building as well as initiatives to bring in new products in its wine and spirits business, are the major growth drivers for the shares of Constellation Brands.

The recent third-quarter fiscal 2013 results add to its streak of upbeat performances. Constellation Brands, which competes with Beam Inc. posted adjusted earnings of 63 cents per share that surged over 21% from the year-ago quarter and surpassed the Zacks Consensus Estimate of 55 cents, primarily driven by increased sales and improved margins.

Net sales in the quarter increased 9% to $766.9 million from the year-ago quarter that also came ahead of the Zacks Consensus Estimate of $744.0 million. Net sales gained on the back of higher volumes and better product mix.

Bolstered by strong quarterly performance, the company raised its fiscal 2013 adjusted earnings guidance to a range of $2.10 to $2.20 per share, up from the earlier projection of $2.00 to $2.10.

Further, we believe that the company’s continued focus on brand building and enhancing market share through acquisitions are accelerating its growth opportunities. During calendar year 2012, Constellation Brands acquired the remaining 50% stake in Crown and the California-based Mark West wine brand.

Stock’s Key Indicators 

From valuation perspective, Constellation Brands looks compelling, suggesting further room for growth. The stock currently trades at a forward P/E of 17.72x, 9.1% discount to the peer group average of 19.50x. Again, its price-to-book and price-to-sales ratio of 2.54 and 2.49, respectively, are nearly in line with the peer group average. Moreover, the company’s return-on-equity (ROE) and return-on-asset (ROA) are 17.9% and 6.1%, respectively, which are higher than the peer group averages. The company’s strong fundamentals are well supported by its long-term estimated EPS growth rate of 10.9%.

Please login to Zacks.com or register to post a comment.